The 34th Cambridge International Symposium on Economic Crime

It is an honor and a privilege for me to be invited to speak at this well-known international symposium, which has been up and running for 34 years under the most admirable leadership of Professor Rider. So, firstly, I would like to take this opportunity to thank Professor Rider for his kind invitation, and also to pay tribute to his dedication and contribution to the study of economic crime.

There is a reason why I am here today, besides my friendship with Professor Rider. As you probably are aware, about two months ago Taiwan’s police authority has been successful in cracking a bank’s ATMs robbery after more than US$2.5 million were stolen by some hackers from several countries. In less than a week, most of the stolen funds had been tracked down, and three members of the criminal gang were arrested.

Based on the information provided by Taiwan’s police and the news reports thus far, members of the gang used malware to hack into the system of the local bank concerned, which triggered the dispense of cash automatically from the ATMs without the need of the criminals operating the machines at site. More than 40 ATMs of the bank were affected across the island. The bank’s account holders were not affected.

The police said this case was the first of its kind in Taiwan. After the discovery of the robbery, other Taiwan banks using the same German model machines have frozen withdrawals for several days to do checks.

The Taiwan police are still investigating the case with the assistance of the Interpol. A few weeks ago in August, similar ATM attacks occurred as well in Thailand. The Thailand police authority believed the crime was conducted by the same group. Due to the swift cracking of the case in Taiwan, a law enforcement team from Thailand recently visited Taiwan’s police authority to learn from our experience. They are sharing information and working together with the hope of finding the rest of the gang members.

Compared with some incidents occurred in the region including in Japan, which also have suffered similar cyber attacks but have so far been unable to solve the crime, the Taiwan’s police authority deservedly should be congratulated for their swiftness in piecing together the crime. And I think this symposium provides an excellent occasion for celebrating a job well done in view of the training our law enforcement officers have received from relating programs at Cambridge in the past decades under Professor Rider’s guidance.

Here today, I’m delighted to point out that Taiwan has so many distinguished participants to attend this symposium, including Dr. Juan-Gi Shih, former Minister without portfolio and current Chairman Taiwan’s Stocks Exchange, Dr. Ming-Tang Chen, Deputy Minister of Justice, Mr. Ching-Hsing Tsai, Director-General of Investigation Bureau, and Dr. Hung-Wen Chien, Chairman of Taiwan’s Securities Association. This is certainly a telling message that Taiwan’s Government wants to express its profound thanks to Professor Rider for his valuable assistance along the way.

Ladies and gentleman, based on my working experiences as Deputy Finance Minister and Finance Minister from 1996 to 2002, during which Taiwan experienced the unprecedented Asian Financial Crisis and luckily came out the storm relatively unscathed, I knew deep down from my heart that the stability and security of the financial market would be of paramount importance for the continued development of Taiwan’s economy. Without which, people would not have confidence and trust in the financial institutions, and the role these institutions play as drivers of economy would be undermined.

I would like to share with you a case of economic crime perpetrated by the top management of a banking institution in Taiwan while I served as Deputy Finance Minister in 1998. The then Chairman of the bank utilized various dummy companies, and illegally obtained loans worth NT$7.4 billion from the bank concerned. Since the Ministry of Finance got a tip-off, based on my strong determinates, a team was dispatched to conduct an ad hoc financial examination. The law enforcement agencies were later called upon to continue the investigation and the illegal activities of the top management surfaced. During the investigation, the Chairman of the bank jumped bail and ran away to China as a fugitive ever since.

Later on, the bank concerned brought a civil lawsuit against the top management and loan handling personnel. These managers and loan personnel argued that the loans were given out because they just followed the instructions of the Chairman. In 2012, the Supreme Court in Taiwan rendered a judgment which ordered the bank’s former board of director, several managers and personnel involved in the issuance of illegal loans to pay civil damages to the bank amounting to NT$800 million on grounds of non performance of their obligation as a good administrator. The court ruled that these managers and loan personnel knew the companies getting the loans were problematic but did not follow the bank’s loan procedures to obtain more information. It was a clear violation of their duty as a good administrator.

Ladies and gentlemen, in the aforementioned judgment, where did the buck stop? The Supreme Court in Taiwan, besides holding the Chairman accountable, also held those who facilitated the issuance of the loans accountable by ordering them to pay damages to the bank because they failed to carry out their duty as a good administrator - they did have a chance to prevent the crime from occurring, but did nothing.

In my view, imposing hefty fines on the perpetrators and facilitators of economic crimes is a deterrent to a certain degree. However, it does not solve the root of the problem. Directors and managers with high ethical standards are essentially the key to prevent economic crimes from occurring. It is the responsibility of directors and managers to build a culture of ethics in the company and lead by examples. Coupled with the philosophy of pursuing quality corporate governance at all times, economic crimes committed by personnel within the company can be reduced to a minimum.

Therefore, when I was invited to serve as Chairman of a financial holdings in Taiwan in June 2005, I declared my visions for the company in my very first shareholders’ meeting “to be a role model for corporate governance and maximize shareholders’ value”. During those eight years as company chairman, I was delighted to see that corporate governance has transcended into a part of the corporate culture and shareholdings of foreign institutional investors have always maintained well above 30%, a strong indicator that these efforts in ensuring the quality of corporate governance were being well recognized by the investors.

Obviously, economic crimes can be committed by outsiders against the company as well, such as the cyber attacks on ATMs mentioned earlier, or crimes perpetrated through financial institutions, such as money laundering. In such cases, where does the buck stop? Should we also hold a bank cashier or financial adviser in good faith but who just happened to be in the position to carry out the services to be accountable? Given the relevant laws and regulations are becoming increasingly elaborate, it is important for financial institutions to take steps to ensure compliance, while training their personnel, including these bank cashier and financial advisers to know all the applicable rules so that they do not place themselves and the company in the risk of breaching the law.

Nonetheless, from a policy point of view, there is always a need to strike a balance between regulation and deregulation. When these laws and regulations specifically designed to help detect and stop economic crimes grow to a point that begin to stifle the development of the industry concerned because the cost of compliance is actually much higher than the effects they are supposed to deliver, it would be the time to reexamine the priorities and conduct a cost and benefit analysis.

Cooperation among government ministries and agencies internationally in combating economic crime has also become increasingly important due to the ever-changing ways of carrying out economic crimes and the trans-boundary nature of these crimes. Therefore, the establishment of law enforcement networks around the world and information sharing among the members will be useful. Despite its status, Taiwan, in this respect, has made some good progress thanks to Professor Rider’s valuable assistance along the way.

Ladies and gentlemen, in closing, while thanking Professor Rider once again for his kind invitation and wishing you all good health and continued success in all of your endeavors, I have every confidence to say that based on the concerted effort performed by this symposium, let’s learn from yesterday, live for today and hope for tomorrow for a better control of economic crime.